India’s Central Bank Is ‘Neutral’ on Rates, Mahalingam Says

March 22 (Bloomberg) -- India’s central bank has a
“neutral” view on monetary policy and the timing of interest-rate cuts will depend on the European debt crisis and oil
prices, said G. Mahalingam, chief general manager of the Reserve
Bank of India’s financial markets department.

“We have reached the peak of rate tightening,” Mahalingam
said today at the Bloomberg Link Sovereign Debt Conference in
Frankfurt. “We are neutral right now.”

The bank left interest rates unchanged for a third
consecutive meeting on March 15. The monetary authority had
raised borrowing costs by a record 3.75 percentage points from
2010 through October last year to curb inflation. The RBI
unexpectedly cut the amount of deposits lenders need to set
aside as reserves on Jan. 24 and March 9 to ease a cash squeeze.

Mahalingam said policy makers aren’t “happy” about the
inflation rate, which rose for the first time in five months in
February to 6.95 percent. The central bank’s “zone of comfort”
is “somewhere around 5 percent,” he said.

“When are we going to start loosening the rate cycle is
something which we need to take on the basis of what is going to
happen to the euro zone and what is going to happen to oil
prices,” Mahalingam said.